Bank of America has begun writing down principal on the mortgages of some troubled borrowers in California through a state program intended to help people facing foreclosure.
The bank has signed on to the principal reduction component of the Keep Your Home California program, which uses federal funds reserved for the 2008 rescue of the financial system to help homeowners behind on their mortgages. For full details of the program, click here.
BofA is the largest of the nation's major banks to join the program, which was launched this year with $2 billion in federal funds. The California Housing Finance Agency, which runs the program, said BofA has been writing down principal on some mortgages as part of a pilot program since February and is now moving into full participation.
“California has been particularly hard hit by reductions in property values,” Rebecca Mairone, national mortgage outreach executive for BofA, said in a statement.
The bank services more than 2.2 million home loans in California, according to the housing agency. Consumer advocates criticized the lack of major mortgage servicer participation when the program was launched this year. Officials said they hope the program will encourage other major financial institutions to join.
“We’re excited to have Bank America on board for one more of the Keep Your Home California programs,” Claudia Cappio, executive director for the agency, said. “We believe principal reduction can be an appropriate tool for helping qualified homeowners obtain an affordable and sustainable modification. We continue to work with other mortgage servicers to offer this to their customers.”
The principal reduction program is aimed at helping cash-strapped Californians who are "underwater" on their mortgages -- those owing more on their properties than what those homes are worth. Those borrowers who qualify could be eligible for a total principal reduction of up to $100,000 through the program.
The program allows for up to $50,000 in aid to troubled borrowers. Banks participating in the principal reduction component are required to match that aid. Mortgages owned or guaranteed by Fannie Mae or Freddie Mac are among those that are not eligible for principal reduction.
Link HereKeep Your Home California has several other programs, including one that helps people pay their mortgages as well as provides moving assistance to certain borrowers who lose their homes to foreclosure. State officials hope to fend off foreclosure for about 95,000 borrowers and provide moving assistance to about 6,500 people who do lose their homes.